Hedge Funds' Annualized Returns

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Stanchion
Posts: 22
Joined: Fri Aug 29, 2014 6:44 pm

Hedge Funds' Annualized Returns

Post by Stanchion » Thu Jan 11, 2018 6:39 pm

How accurate are public estimates of hedge funds' annualized returns? Recent reports gave wide ranges for the annualized returns of Citadel since the fund's inception. As hedge funds do not typically release their results, how reliable are the composite figures generated by analysis firms like Hedge Fund Research?

moneywise3
Posts: 312
Joined: Mon Nov 22, 2010 6:54 pm

Re: Hedge Funds' Annualized Returns

Post by moneywise3 » Thu Jan 11, 2018 6:41 pm

Subtract the fees and tax ramifications. And look at long term performance, not a few select years

User avatar
David Jay
Posts: 4286
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Hedge Funds' Annualized Returns

Post by David Jay » Thu Jan 11, 2018 6:42 pm

I know that they are worse than the SP500:

viewtopic.php?t=236312
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

betablocker
Posts: 358
Joined: Mon Jan 11, 2016 1:26 pm

Re: Hedge Funds' Annualized Returns

Post by betablocker » Thu Jan 11, 2018 7:37 pm

They are very unreliable. A lot is self reported and the hundreds of funds that close down each year create survivor bias. Also hedge funds have such differing strategies that even if you had the average you wouldn’t know much.

Stanchion
Posts: 22
Joined: Fri Aug 29, 2014 6:44 pm

Re: Hedge Funds' Annualized Returns

Post by Stanchion » Fri Jan 12, 2018 4:44 pm

betablocker wrote:
Thu Jan 11, 2018 7:37 pm
They are very unreliable. A lot is self reported and the hundreds of funds that close down each year create survivor bias. Also hedge funds have such differing strategies that even if you had the average you wouldn’t know much.
What you and the other respondents say is in line with all of the research I have found on this topic. Why then, with hedge funds' historically poor performance and their record of producing absolute return only for the fund managers themselves through guaranteed management fees, would pension funds for corporations, government workers, and labor unions ever allocate anymore than a tiny percentage of their assets to hedge funds?

One of the pressing questions on my mind is whether the employees contributing to these pension funds truly have a good understanding of what a portion of their money is being siphoned into? Are there standardized methods in place to ensure that pension fund participants are given regular updates of where their money is going to be invested?

One recent news story which rekindled this question in my mind was featured in the New York Times:
https://www.nytimes.com/2017/10/22/nyre ... .html?_r=0

In this case, the defendant was accused of putting $20 million of the pension fund into a high-risk hedge fund. Were members of the union given notice of this new investment before it was made?

Post Reply